Rising ACA Exchange Costs May Slow Interest in ICHRAs

Individual coverage health reimbursement arrangements have attracted growing interest from employers looking for an alternative to traditional group health plans. However, a new survey suggests that rising Affordable Care Act Marketplace premiums following the expiration of enhanced federal subsidies may become one of the biggest obstacles to broader adoption.

The Employee Benefit Research Institute (EBRI) and Morgan Health surveyed nearly 1,000 employer benefits decision-makers and found that more than one-third were planning or evaluating an ICHRA. However, only 11% had implemented one, suggesting that many employers remained in the research stage rather than being ready to make the switch.

An ICHRA allows employers to contribute a fixed amount that employees use to purchase individual health insurance, usually through the ACA Marketplace, instead of participating in the employer’s group health plan. The arrangement gives employers predictable benefit costs while allowing employees to choose the plan that best fits their needs.

For 2026, employers can generally contribute up to $6,450 annually for self-only coverage and $13,100 for family coverage while meeting the ACA affordability standards. However, those amounts may not come close to covering premiums for many employees, raising concerns that they could face significantly higher costs if employers move from a group health plan to an ICHRA.

Employers’ biggest concerns

• ACA Marketplace premiums. 85% of large employers, 81% of small employers offering health coverage and 79% of small employers without health coverage worried that individual-market premiums were too expensive for employees.
• High out-of-pocket costs.84% of both large and small employers offering health coverage believed deductibles and other out-of-pocket costs could be too high for workers purchasing coverage on the exchange.
• Marketplace quality concerns. Employers questioned whether individual-market provider networks and plan quality matched those of traditional group health plans.
• Employees prefer group health plans. Employers said worker preference for traditional employer-sponsored coverage remained one of the biggest barriers to switching.
• Limited knowledge of ICHRAs. Between 56% and 69% of employers correctly understood the basic ICHRA model, and 55% of small employers that did not offer health coverage were unaware that ICHRAs were even available.
• Administrative complexity. Employers also expressed concerns about implementation, compliance requirements and ongoing administration.

Despite those concerns, employer interest continues to grow, according to the EBRI report. Employers with 100 or more workers expressed the strongest interest, with 62% saying they were likely to adopt an ICHRA within two years. Among small employers that did not offer health coverage, one in four said they would prefer offering an ICHRA rather than a traditional group health plan.

What employers said would increase adoption

According to the survey, employers said they would be more likely to offer an ICHRA if:

• Provider networks in ACA Marketplace plans match the quality and choice available through group health plans (85%).
• ICHRAs integrate with payroll systems (79%).
• Employers could add supplemental benefit solutions (79%).
• ICHRAs integrate more seamlessly with existing health benefits (78%).
• More peer employers adopt ICHRAs (76%).
• Federal or state tax credits encourage adoption.
• The ACA Marketplace becomes more stable, affordable and predictable.